MAJOR COMPANIES OF THE WORLD

RCA Corporation

Fact File:

Founders: Thomas A. Edison, Elihu Thomson, and Edwin Houston.

Distinction: Brought radio, then television, into American homes.

Primary products: Televisions, camcorders, other consumer electronics.

Annual sales: $4.5 billion.

Number of employees: 22,800.

Major competitors: Matsushita, Philips Electronics, Sony.

Chairman and CEO: S.A. Thomson and Thomson Multimedia: Thierry

Breton.

Headquarters: Indianapolis, Ind.

Year founded: 1960.

Web site: www.rca.com.

Moments after the R.M.S. Titanic hit that infamous iceberg on April 14,

1912, a 21-year-old radio operator with the Marconi Wireless Telegraph

Company picked up its distress signal in his Manhattan office. The young

Russian immigrant David Sarnoff remained at his post atop the

Wanamaker department store for the next 72 hours, relaying increasingly

pessimistic reports from sea to others throughout his network. He was

unable to stop the ship's sinking, of course, but his imagination was

piqued by the way he could relay information about it around the world.

As Sarnoff rose through the ranks at Marconi over the next several years,

he couldn't stop thinking about ways to make such communication

available to ordinary citizens. In 1916, those contemplations finally

settled into a solid idea for a commercially marketed receiver that he

called a "radio music box." It would transmit songs, Sarnoff speculated,

as well as news and other programming. Most people could not accept the

notion of music and voices beaming directly into their homes, so it took a

few years before those who did were able to help make it a reality.

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Not surprisingly, when they did-through a new company called Radio

Corporation of America-Sarnoff became an integral part of it and would

remain so for the rest of his life. During that time, the entertainment

conglomerate that RCA became aided two war efforts, pioneered the

audio broadcast of live events, made the equipment that both transmitted

and received them, built phonographs and produced motion pictures,

formed the NBC network, built New York's Rockefeller Center and Radio

City Music Hall, introduced television to the public, created the standard

for color TV and produced the first sets to employ it, and even brought

images of space flight into America's homes.

Since Sarnoff's death in 1971, RCA has admitted going through some

tough times. But despite competition that cut deeply into its once

formidable position in radio and television and its sale to a French-based

firm that had a hand in its founding nearly seven decades earlier-the

company remains a significant force in electronics and a firm most

consumers still know and trust.

RCA's roots go back to Thomas Edison and Elihu Thomson, a 19th century

chemistry teacher at Philadelphia's Central High School. Fascinated by

electricity, Thomson started a company with fellow teacher Edwin Houston

to pursue his interest just as Edison was forming the Edison General

Electric Company in New Jersey. Thosmon-Houston won a major award at

the Exposition Universelle in Paris-the 1889 event for which the Eiffel

Tower was erected-and three years later merged with Edison General to

create General Electric. Thomson-Houston's principals then returned to

France, where they established a new company with similar goals.

Around that time, Guglielmo Marconi was preparing his first wireless

transmission. The electrical engineer's pioneering work quickly led to the

establishment of Marconi Wireless, which opened an American branch in

1899 and for the next two decades remained the only company able to

send transatlantic radio signals. With the outbreak of World War I,

Assistant Navy Secretary Franklin D. Roosevelt determined that such

technology should rest in U.S. hands and turned to General Electric for

help. In 1919 GE responded by forming the Radio Corporation of America,

which took over American Marconi and began marketing the related

equipment that it was producing.

 

There were barely 5,000 radios in American homes when RCA began, and

only the Westinghouse Company was broadcasting commercially. That all

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changed quickly, however. David Sarnoff, who moved from Marconi to

RCA, jump-started the new industry in 1921 by airing the first live sports

broadcast: a heavyweight boxing championship between Jack Dempsey

and Georges Carpenter that attracted 300,000 listeners. Baseball's first

broadcast of the World Series came a few months later, and stations

began appearing around the country to tap into the new demand. By

1924, more than 2.5 million radios wee in use, and RCA had built most of

them. When Charles Lindbergh made his historic flight across the Atlantic

in 1927, some 6 million sets could tune in to the news.

Correctly assessing the potential of radio, Sarnoff bought New York's

WEAF and made it the anchor station for a new nationwide network,

which he dubbed the National Broadcasting Company. It soon had 25

member stations stretching from coast-to-coast. Its first major

transmission was the Rose Bowl football game on New Year's Day, 1927.

Much like the boxing match aired previously, it proved enormously

successful and helped radio's popularity soar. RCA, which had been

marketing sets built by GE and Westinghouse, was spun off to take over

all research and development, manufacturing, and sales operations. It

then bought the Victor Talking Machine Company and began making

phonographs as well as radios. Along with other assets, the newly

renamed RCA Victor acquired its popular "His Master's Voice" trademark

featuring Nipper the Fox Terrier listening intently to an antique

phonograph. In years to come, this would prove practically as well-known

as any of the company's products.

The 1929 stock market plunge hit RCA hard as consumers turned away

from purchasing goods like radio sets. Undaunted, Sarnoff expanded the

company's manufacturing capacity and-utilizing NBC's talent pool-joined

with a chain of vaudeville theaters to open the RKO movie studio. He

began construction on New York's Rockefeller Center and Radio City,

which RCA and NBC later utilized as headquarters. And he set his sights

on new horizons by hiring engineer Vladimir Zworykin to help develop an

even more advanced technology: television.

 

Sarnoff had forecast the possibility of TV as early as 1920, and crude

pictures were already being transmitted by the time RCA entered the

game. Zworykin, one of the field's pioneers, told Sarnoff it would take 18

months and $100,000 to develop a marketable system. It ultimately took

10 years and $50 million, but the two wee able to unveil RCA television at

the 1939 New York World's Fair. President Franklin D. Roosevelt, who had

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been instrumental in RCA's creation and a frequent voice on NBC radio,

became the first head of state to appear on the new medium when his

opening remarks were telecast.

Commercial development of TV halted when the United States entered

World War II, and RCA converted its plants to produce bomb fuses, mine

detectors, and even recorded entertainment for the troops. "All our

facilities and personnel are ready and at your instant service," Sarnoff

wrote to the president. As soon as the war ended, he immediately

resumed TV production and in 1946 introduced a 10-inch set that sold for

$375. The next year, as NBC began moving its radio stars onto television,

Sarnoff became chairman of RCA's board.

TV blossomed during the 1950s, and both RCA and NBC took full

advantage of the medium. They also capitalized on the budding move to

color by trumping CBS, which was first to offer it, and introducing

technology that was adopted as the industry's standard. A few months

after NBC broadcast the first live color program-the 1954 Tournament of

Roses Parade-RCA's first color set became available. The 12-inch model

sold for $1,000 but its appeal was strong. Within five years a half-million

such sets had sold and NBC's Bonanza. TV's most popular show, was

airing in color. By 1962, two-thirds of all TV was "colorcast."

By 1970, television was omnipresent and color was commonplace. RCA

brought back a little pizzazz by beaming America's space flights into the

homes of enthusiastic viewers. Its technological moves also included a

joint venture with old friend Thomson of France to produce innovative

picture tubes. RCA would change forever during the following year,

though, when leading light David Sarnoff died at age 80.

Product advances continued during the 1970s, such as the ColorTrak TV

and a four-hour home videocassette recorder. RCA also marked a quartercentury

in the color television business in 1979 by producing its 100

millionth picture tube. Around the same time, the company partly

responsible for its existence had become a nationalized French owned firm

called Thomson S.A. Operated as a holding company with more than 115

subsidiaries, it derived more than half its sales from high-tech

enterprises.

 

General Electric reacquired RCA (including NBC) in 1986 for $6.4 billion in

what was the largest non-oil company merger. Many of the assets it

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procured did not fit its master plan, however, and the following year it

sold the RCA and GE consumer electronics businesses to Thomson. The

French firm then created a Thomson Consumer Electronics subsidiary to

run them. In the early 1990s it set up American headquarters in

Indianapolis, and in 1995 changed the division's name to Thomson

Multimedia.

RCA's share of North American TV sales, which had been slumping, rose

slightly under the new ownership. The company also introduced an audio

line based on the emerging popularity of musical compact discs, and by

the mid-1990s was second only to Sony in the field. Additional products,

such as a 56-inch television, advanced camcorders, and high-definition

TVs, also wee added to the line.

Despite its innovations and heritage, Thomson Multimedia struggled

initially and its parent tried unsuccessfully to unload it. By the turn of the

century, however, it seemed to be turning everything around. In 1999 the

American operations-of which RCA and GE comprised the majority of

sales-tallied $224 million in profits, up a remarkable 1,400 percent from

the year before. A primary factor was the consistent introduction of

appealing new products after years of stagnation, as RCA's once and

future owner renewed the pioneering spirit that had mad3e it a force in

the first place.

Nike Inc.

Fact File:

Founders: Bill Bowerman and Phil Knight.

Distinction: Made the sports shoe a cultural icon.

Primary Products: Athletic footwear, apparel, equipment, and

accessories.

Annual sales: $8.777 billion.

Number of employees: 20,700.

Major competitors: Adidas-Salomon, Fila, Reebok.

Chairman and CEO: Philip Knight.

Headquarters: Beaverton, Ore.

Year founded: 1962.

Web site: www.nike.com.

 

When Michael Jordan ruled the basketball court, athletic footwear ruled

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the world and Nike was the undisputed king of shoe business. This

Oregon-based company had totally transformed the once-humble sneaker

into sporting gear-as-fashion statement. It unveiled a cool new slew of

highly technical models designed expressly for highly specific activities,

each year with more fanfare, features, and snappy names. Older fitnessconscious

consumers went for it wholeheartedly, snapping up shoes for

jogging, aerobics, walking, golf, and anything else that they could do on

two feet. And when Nike hit upon the idea of signing popular athletes to

endorse appropriate models, seemingly every kid on the planet suddenly

wanted to be like Mike, Mia, or Tiger.

But just as surely as it had defined the parameters of this sporty but

stylish revolution, Nike was singled out for both manipulating it and

running it into the ground. The firm drew passionate criticismsometimes

deserved, sometimes not for exploiting foreign

workers, raising brand consciousness to an art form, driving

prices to outrageous levels, inundating the airwaves (not to

mention sidelines) with its "swoosh" logo, even taking advantage

of the millionaire athletes who participated in its omnipresent

promotions.

To compound matters, Nike couldn't sustain its performance on the field.

For years, it was the hot ticket: between 1994 and 1997, when it was

already a mature company, sales jumped nearly 150 percent to $9.2

billion. New brand extensions, like outerwear for bicyclists, constantly

appeared on the market. Swooshes turned up everywhere. For a time,

Nikes became the incontestable accessory for an entire generation. But

then, almost without warning, the other shoe dropped. Hiking boots and

casual leathers became the kids' footwear of choice. Boomers slowed

down a bit. Competitors homed in on particular niches.

Today, despite it all, Nike remains the driving force in its industry. It still

offers some 500 generally well-regarded shoe models, and even

more types of apparel. It operates giant Niketown superstores and is

opening a few Jordan-themed specialty outlets. And it continues selling

billions of dollars in product each year in more than 100 countries. But it

doesn't rule the world right now, and for Nike-accustomed as it is to

coming in first-that's an unacceptable position.

Back in 1962, few people would have picked Eugene, Ore., as the place to

start a revolution. The local University of Oregon campus had long been

 

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home to a successful track program. Bill Bowerman-head coach since

1948-unwittingly touched one off when he teamed up with Phil Knight to

distribute Japanese-made Tiger athletic shoes under the BRS (or Blue

Ribbon Sports) name. By 1964, they had sold 1,800 pairs. Four years

later, a Bowerman design became the parent company's best-selling

model. Emblazoned with a little optimism and a lot of ideas, he and

Knight decided to manufacture 330 pairs of their own latex-and-leather

design. Its distinguishing feature was a unique lightweight sole that was

made with a waffle iron belonging to Bowerman's wife. The two sold out

their entire supply at $3.30 a pair, and gave birth to a corporation, as well

as a revolution.

Knight, who had trained under Bowerman before pursuing an M.B.A. at

Stanford, began traveling to track meets to peddle these funny-looking

new shoes form the trunk of his car. The pair's combination of chutzpah

and creativity caught on and helped their fledging effort catch fire. They

unveiled the swoosh logo in 1971, and launched the Nike brand the next

year at the U.S. Olympic Trials in Eugene. The world's elite runners

(including four of the top seven finishers in the 1972 Olympic marathon)

soon began wearing them. By 1974, the company was well on its way

with 250 employees, sales operations in Canada and Australia, a factory

in New Hampshire, and $4.8 million in revenues.

Olympic runner Steve Prefontaine-another Bowerman protégée whose

crusades on behalf of both better equipment and the sport itself-helped

inspire the company's direction until his tragic death in a 1975 car crash.

The entrepreneur and the coach pooled their complimentary talents and

forged ahead. Named for the Greek goddess of victory, their hot new

company achieved one win after another in shoe design and the business

world. Runners loved their product and retailers loved selling them.

Tennis great John McEnroe became the first pro athlete to sign an

endorsement deal with them. And at the end of the decade, with 2,700

employees and 50 percent of the market, they went public.

 

The early 1980s was a period of expansion in product line, market

penetration, and consumer reputation. By the time its first apparel items

appeared, Nike's swoosh could be found in over 40 countries. Fifty-eight

athletes at the Los Angeles Olympics, including Joan Benoit and Carl

Lewis, captured 65 medals while wearing Nike shoes. And in one of the

most serendipitous deals ever consummated between a corporation and

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an individual, Nike and Chicago bulls rookie Michael Jordan agreed in

1985 to co-produce a line of Air Jordan basketball shoes and related

sports clothing. One year after this monumental alliance, Nike's annual

revenues topped the magical $1 billion mark for the first time.

But even while its Jordan products were wholly redefining the sporting

goods industry, Nike was experiencing problems that threatened its

success. An assortment of distribution and sales-department illsstemming

from growing pains as well as the company's notoriously insular

culture-led to a series of earnings bumps. After some major internal

introspection, various operational changes followed. The iconoclastic "Just

Do It" campaign, along with an urban recreation program called P.L.A.Y.

(Participate in the Live of America's Youth), along with various

environmental efforts, also were launched. Technological advances, for

which Nike was long known, remained on track. Within five years, the

combination drove revenues steadily back to more than $3 billion. The

addition of improved sports-specific apparel in the 1990s, along with the

signing of a promising young golfer named Tiger Woods, elevated Nike

even further into legendary corporate circles.

But then the shoe hit the fan. Ongoing criticism of the way its foreign

workers were being treated gave the company a very public black eye.

Footwear tastes shifted from Nike's strengths, while some key up-andcoming

trends were completely overlooked. Advertising, which was

traditionally a Nike strength, fell flat. And it alos failed to take early

advantage of the World Wide Web. Nike still captured the lion's share of

the athletic footwear market with great shoes designed for everything

form cross-country to cheerleading, but the juggernaut that had produced

one of the world's most recognizable brand names had indeed hit the

wall.

 

Phil Knight, a maverick as well as a tough businessman knew it was time

to stop playing around. He admitted that the company's globalization

efforts had proceeded too fast and spread its resources to thin. He

launched a massive restructuring program that included 1,900 layoffs and

a significant reduction in the number of products carrying the Nike logo.

He expanded the orientation for most new hires from a single to two full

days, in hopes that everyone would more fully understand the historical

basis under which the legendary Nike culture had developed. He also spun

off the line of hardcore sports apparel called All-Condition Gear, or ACG,

creating a separate operation with its own staff, budget, and marketing

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plan.

And, perhaps most significantly, Knight publicly began to examine Nike's

policies toward its low-paid labor force in developing countries. He

admitted that neither he nor his company had handled the matter very

well in the past. To help change that, he brought Maria Eitel in from

Microsoft to serve as Nike's first vice-president for corporate

responsibility. She now has a staff of 95, and her efforts have been

grudgingly acknowledged by even some of Nike's harshest critics.

Using ACG and its newly formalized center, Nike is trying to bring back

former customers who may have had their heads turned in recent years

by other suitors. It also is working hard to attract the active young crowd

that in the past never gave them a second look. The Internet, at last, is

becoming a part of it. So are edgier commercials on TV and in print. The

company is researching ways to shorten the cycle between design and

manufacturing so it can react more quickly to new trends, and improve

the supply lines with which it meets resultant retail demand. It also has

been trimming expenses. Through it all, Knight has conveyed the

unmistakable message that his company will not quit-and competitors

better prepare for an exhausting sprint to the finish line.

 

The world may no longer be sneaker-crazy and Nikes may have fallen

somewhat out of favor. But athletic footwear is here to stay. And a lot of

people are betting that Nike, which led the revolution, will remain at the

front of the pack.

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